The Magic of Diversified Revenue for Nonprofits

Having diversified revenue streams means you have money coming in from a variety of sources. It creates stability and keeps you from being overly dependent on one source of funding, which is dangerous.

The problem with sole-source funding

I had a client several years ago that funded most of their million-dollar budget from a single grant through the State of Tennessee (cue the sad music). The State starting cutting their budget and grants were reduced. Which meant that this nonprofit was immediately struggling.

They had not prepared for ANY other kind of income – no earned income from programs, no fundraising – nothing. Even though the organization was over 30 years old, they had never really asked anyone for a donation.

It was total heartbreak. We started fundraising, but it was nearly too little, too late.

Moral of the story? Don’t put all your eggs in one basket. Don’t rely on sole source funding.

Why you need diversified funding

When you have lots of fundraising strategies working for you, you can lose one and it’s not fatal.

I remember watching this play out after September 11.

I was working at the Food Bank when the planes hit the twin towers. After that, lots of people in Knoxville were donating to various causes benefiting New York City. Lots of us working in fundraising started to get nervous – would our donors give to New York and not us? How much would we be short? What would we do to make up the difference?

I watched my numbers very carefully that year, and I was thrilled when all my best donors sent in their gifts. I remember ONE corporate donor who did not make his usual $10,000 gift to us and instead sent ALL his charitable giving to New York. Since I had money coming in from so many sources, we hardly missed that single gift. I had colleagues who didn’t weather that storm as well and had to deal with some pretty ugly situations.

What good diversified streams looks like

So, what does it look like to have diversified revenue? It might look like a good mix of events, grants, appeals, online giving, monthly giving, and so forth. But even with all that, NO ONE grant, event, or donor makes up more than 30% or so of your total income.

Here’s one way to think about it. Use my 1-10-1000 Rule.

Do 1 event and do it really well. Get multiple corporate sponsors for it. Make it an event that everyone wants to attend. Make a crap-ton of money from the event so that it’s really worth your while.

Get 10 grants. Or more. Just don’t leave any grant money on the table. Get all the grant money you can without letting any single grant be more than 30% of your revenue.

Build a donor base of 1,000 (or more). Surround your nonprofit with a large pool of supporters who WANT to see you succeed. The more you have, the safer it is for you.

After you build that base, start to segment it. Identify your 10 best donors and build relationships with them. Start a monthly giving program for those people who want to give regularly.

Can you see how stable your income would be if you had all those things in place?

Here’s an example.

Sample Diversified Fundraising

Strategy

Goal

Projected dollars raised

Percent of total

Grants

Private foundation grants

$15,000

15%

Events

Fundraising gala

$31,500

32%

Individual donors

Feb: Valentine’s appeal

April: Spring appeal

September: Fall appeal

December: Year-end appeal

$2,500

$5,000

$10,000

$5,000

3%

5%

10%

5%

Giving Tuesday

Invite people to give on Dec 1 (Giving Tuesday)

$5,000

5%

Calendar

Create and sell a calendar

$5,000

5%

Program Sponsorship

Sponsor the costs of part of the program at $1,200 each

$18,000

18%

Marketing

Give at least 12 presentations in the community (civic groups, clubs, etc.)

$1,800

2%

Total

$98,800

If any of those streams dropped off, it wouldn’t necessarily be easy, but it could be overcome. You wouldn’t want to lose the event at 32% of revenue, but the better job you do with the appeals, the more those numbers will go up and the event as a percentage of the total will go down. Make sense?

Watch this video as I dig a little further into the Sample Template

Takeaways

If you’ve never looked at your revenue in terms of streams and calculate each stream as a percentage of the total (like the sample), I encourage you to do that. It’s very eye-opening. You may find that you’re a little too dependent on one source.

Once you choose the fundraising strategies you want to use for the year, get really good at them. This whole concept doesn’t work as well if you’re struggling and nothing feels like it’s working.

If you’re starting from scratch, take it one piece at a time. Remember, Rome wasn’t built in a day, and if you have lots of streams to build, it will take time.

Be proactive in creating diversified streams. Create a plan and work it. Get organized. And stay committed.

Watch your revenue streams each month to see how they’re doing. You can’t manage what you don’t measure, and you’ll want to manage this. Watching the numbers is half the fun!

Creating diversified revenue streams is one of the basics of fundraising that you need to master if you want to fully fund your nonprofit’s good work. Want to learn the rest? Join me for a brand-new training called Founding to Funding, where I’ll teach you how to surround yourself with ideal donors, share words that warm their heart, and ask for a gift at just the right time. Get all the details and register at www.getfullyfunded.com/foundingtofunding.

What People are Saying

“About 4 years ago we were deep in the hole. Thanks to Sandy and her system, we now have 6 months operating expenses in a reserve fund and an endowment! We have stable and diversified funding and strong individual donors. Not to mention a lot less stress!”